SBI Written Off Rs 76,600 Crore

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IN NEWS

Under the Right to Information (RTI) Act, RBI has disclosed the bank-wise break-up
Where loans worth more than Rs 100 crore and Rs 500 crore were written off by the banks as of March 31 this year.
The data has been accessed through a series of RTI applications following the Supreme Court judgments.
That directed the RBI to disclose relevant information on nonperforming assets (NPAs) and bad debts under the RTI Act.

The Indian banking system has lost Rs 1.76 lakh crore on account of non-performing loans of 416 defaulters — each owing Rs 100 crore or more — being written off.
On an average, the amount declared as bad loans turns out to be around Rs 424 crore per borrower.

As many as 980 borrowers have been enlisted by the RBI whose debts of more than Rs 100 crore each had to be written off by banks.
Of these, 220 accounts – more than one-fifth of the total number – belonged to the SBI.
An average of Rs 348 crore was waived off in respect of each such account.
Of the 71 total accounts reported as having defaulted on loans of over and above Rs 500 crore each.
The SBI’s share turned out to be 33 – 46% of the total.

While SBI and PNB topped the list among the public sector banks, the IDBI Bank was is at the top among private banks.
The IDBI also came 3rd among all the scheduled commercial banks in declaring bad debts of Rs 100 crore or more.

A loan write-off is a tool used by banks to clean up their balance-sheets.
It is applied in the cases of bad loans or NPA.
If a loan turns bad on the account of the repayment defaults for at least 3 consecutive quarters, the exposure (loan) can be written off.

A loan write-off sets free the money parked by the banks for the provisioning of any loan.
Provision for a loan refers to a certain percentage of loan amount set aside by the banks.
The standard rate of provisioning for loans in Indian banks varies from 5-20%.

Suppose a bank disburses a loan of Rs 1 crore to some borrower and is required to make a 10% provision for it.
So, the bank sets aside another Rs 10 lakh.
If the borrower makes a bigger default, say Rs 50 lakh, The bank can write off additional Rs 40 lakh mentioning it as an expense in the balance sheet.
But as the loan is written off, it also frees Rs 10 lakh originally set aside for provisioning.
That money is now available to the bank for business.

Write-off does not mean bank has completely lost the money.
It does not take away the bank’s right of recovery from the borrower through legal means. (IBC)
After writing off bad loans, any recovery made against them is considered as profit for the bank in the year of recovery.